“After 45 glorious years of providing home loans to over 9 million customers, the time is right for HDFC to find a new home. Our new home is with our family, with our own people, but it’s bigger, better and significantly more promising,” said HDFC Chairman Deepak Parekh on Monday, soon after the merger of HDFC Ltd with HDFC Bank was announced.

In a press conference, he, along with top management of the two entities, including HDFC Vice-Chairman and CEO Keki Mistry; HDFC Bank Chairman Atanu Chakraborty; and HDFC Bank MD and CEO Sashi Jagdishan, explained the nitty-gritties of the proposed transaction. Excerpts: 


What is the role you see for yourself in the combined entity?

Parekh: This process will take anywhere between 15 to 18 months because of the numerous approvals we need. RBI rule does not allow anyone above 75 to be on the board of a bank. I have already crossed that age, so there is no way I can be on the board of the bank. So far as Keki Mistry is concerned, he is 67 years old, it should take a year or so, so he may have a year, year-and-a-half to be a director on the board. He will not be a full-time executive as he doesn’t want to be a full-time executive. He can handle the mortgage functions, investor relations, whatever Sashi wants with Keki. We leave it to them to see. We will all be taken care of. We won’t be thrown off. It is a merger of equals, it is a friendly merger. It’s not at all hostile. Son grows older, he acquires the father’s business. So that’s all happening here. 


How confident are you of getting all the regulatory approvals? The RBI says a bank can have about 30 per cent stake in an insurance company.

Parekh: We are quite hopeful that that we will get approvals from the regulators. It is positive for the economy. You need large banks in the country. The RBI is encouraging NBFCs to become banks. And for NBFCs also the arbitrage, which was available in the past, is getting narrowed. So, there’s very limited advantage of being an NBFC because similar regulations of banking are coming to the NBFC sector, particularly the large NBFC sector. 


Will HDB Financial continue to be an NBFC under HDFC Bank?

Jagdishan: Today, the stake of the bank is about 95 per cent. We would love to have it as a subsidiary, but if the regulatory prescriptions suggest that we may have to have an alternate thought process, we’re happy to do so.


What was the trigger point for the deal?

Mistry: In the past, it did not make sense for a variety of reasons. One is that at time the CRR, SLR requirement was a lot higher than what it is now. Second, interest rates today are significantly lower than what they used to be. So, if we had to raise money for buying securities or something, today the cost of that money will be a lot less. Also, the regulations have changed. We carry a certain amount of LCR requirements. So, we carry liquidity. So, today, the financial cost of a merger is virtually very limited. Once the merger is done after the effective date, we should be EPS from day one, from the very first year. The reason is that 21 per cent of our shareholding and HDFC bank gets cancelled. So, when that gets cancelled, the shares come down, which automatically triggers an increase in the EPS.


When do you see cross selling opportunities accruing in the numbers? 

Mistry: It should start showing and accruing in the numbers reasonably quickly — once the effective date sets in. The way it is envisaged today, till the effective date, the two institutions will operate as the way they are right now. Then the integration process can be taken up full force. Cross-selling can start between this. The ability to cross cell products, whether it’s mortgage products to HDFC Bank customers, whether it is products for life insurance, general insurance, asset management to this whole pool of customers of the bank that will increase significance.